Slide 1: Results 3Q19
Results 3Q19 Telefônica Brasil S.A. Investor Relations November, 2019
Slide 2: Disclaimer
DISCLAIMER This presentation may contain forward- The exclusive purpose of such looking statements concerning future statements is to indicate how we prospects and objectives regarding growth of intend to expand our business and the subscriber base, a breakdown of the various they should therefore n
Slide 3: 3Q19 Highlights
3Q19 HIGHLIGHTS Key Segments Revenues Profitability Cash +34.0% +2.6% +2.8% +14.9% FTTH Customers YoY YoY Recurring EBITDA YoY YoY FTTH Revenues Total Revenues 36.2% EBITDA Margin 9M19 Free Cash Flow (+44.5% YoY) (highest growth in 3 yrs) (R$ 5.6 bn) +7.3% +4.6% +0.6% 6.7% Postpaid Customers YoY YoY
Slide 4: Strong recovery of mobile revenues driven by rational commercial approach and handset sales
STRONG RECOVERY OF MOBILE REVENUES DRIVEN BY A RATIONAL COMMERCIAL APPROACH AND HANDSET SALES Mobile Revenues¹ R$ Million Price increases across all segments carried out during the year leading Vivo to improve MSR evolution 6.6% Mobile Service Revenue Growth YoY% YoY 8.0% 6.8% 4.6% 3.5% MSR² 7,161 4
Slide 5: Mobile leadership based on superior network quality and enhanced customer experience
MOBILE LEADERSHIP BASED ON SUPERIOR NETWORK QUALITY AND ENHANCED CUSTOMER EXPERIENCE Continuous market share expansion, solidifying our Rational commercial strategy with price increases leadership being applied to all customers… Mobile Market Share Price increase of entry plans % August/19 32.3% 39.
Slide 6: Revenues from growing businesses now weigh more than legacy revenues
REVENUES FROM GROWING BUSINESSES NOW WEIGH MORE THAN LEGACY REVENUES Fixed Revenues¹ R$ Million Transformation of revenue mix driving fixed business toward turnaround -3.9% Fixed Revenues Breakdown YoY YoY 43% FTTH, FTTC, 4,045 49% 51% 14.9% 3,886 IPTV, Data & IT 634 716 12.9% 57% Voice, xDSL, 51% 4
Slide 7: Increasing proportion of fiber customers guaranteeing consistent ARPU increase
INCREASING PROPORTION OF FIBER CUSTOMERS GUARANTEEING CONSISTENT ARPU INCREASE QUARTER AFTER QUARTER Broadband Accesses and ARPU Pay TV Accesses and ARPU FTTH Accesses Thousand IPTV Accesses Thousand 34% 27% 45% 53% 2,332 536 681 1,741 1,198 351 3Q17 3Q18 3Q19 3Q17 3Q18 3Q19 % over % over BB base 16
Slide 8: Accelerating deployment of FTTH cities, with results above our expectations
ACCELERATING DEPLOYMENT OF FTTH CITIES, WITH RESULTS ABOVE OUR EXPECTATIONS FTTH launched in 33 new cities in 9M19, already Expansion not only to new cities but also through surpassing the total of 30 cities launched in 2018 the overlay of selected FTTC areas FTTH Cities Fiber HPs Distribution milli
Slide 9: Alternative models to accelerate fiber expansion with less capex
ALTERNATIVE MODELS TO ACCELERATE FIBER EXPANSION WITH LESS CAPEX AND REDUCED TIME TO MARKET Partnership Franchising › Partner builds and operates Homes Passed (HP) › Franchisee builds and operates the network Leveraging on new infrastructure and manages the customer relationship, selling operating m
Slide 10: Investment of R$ 2.4 billion in 3Q19, in line with year-end guidance
INVESTMENT OF R$ 2.4 BILLION IN 3Q19, IN LINE WITH YEAR-END GUIDANCE FOCUSED ON NETWORK DIFFERENTIAL Capex ex-Licenses¹ R$ Million Accelerating investment in Fiber and 4.5G to improve returns and user experience 19.7% Fiber Investment 18.8% 16.6% 9M18 154 FTTH + IPTV Cities +25% 101 FTTC Cities 9M19
Slide 11: EBITDA margin expansion as a result of digitalization and simplification initiatives
EBITDA MARGIN EXPANSION AS A RESULT OF DIGITALIZATION AND SIMPLIFICATION INITIATIVES 3Q19 Cost Evolution ex-Cost of Personnel YoY Cost of Services Rendered YoY Goods Sold¹ 6.0% +0.6% -0.2% Due to higher costs with network expansion -0.9% -5.9% 3Q18 3Q19 3Q18 3Q19 13.3% of Opex 41.1% of Opex 6,284 6,
Slide 12: Evolution in digitalization of customer relationship and automation opportunities
EVOLUTION IN DIGITALIZATION OF CUSTOMER RELATIONSHIP AND ADDITIONAL OPPORTUNITIES IN AUTOMATION OF PROCESSES Customer Care with Post-Sales & Billing & Collection AI (AURA) Maintenance 65% +14% YoY 14% FRONT OFFICE e-billing penetration unique Meu Vivo app of B2C technical KPIs presenting positive (+
Slide 13: Softer evolution of recurring net income impacted by lower IOC distributed
SOFTER EVOLUTION OF RECURRING NET INCOME IMPACTED BY LOWER AMOUNT OF IOC DISTRIBUTED YOY 9M19 Net Income Reported¹ R$ million +2.6% YoY (Recurring)³ (3,647) 256 (494) 93 242 (165) 7,442 3,795 3,892 3,727 9M18 Non-Recurring 9M18 Recurring D&A Recurring Recurring Taxes 9M19 Non-Recurring 9M19 Reported
Slide 14: Free cash flow expanding 15% YoY in 9M19
FREE CASH FLOW EXPANDING 15% YOY IN 9M19 EVEN DURING A HIGHER CAPEX CYCLE, DUE TO EBITDA GROWTH AND FINANCIAL EFFICIENCIES Free Cash Flow¹ R$ million 9M18 9M19 Strong balance sheet leading to net cash position Recurring Interest and Working FCF from CAPEX Gross Debt² R$ billion EBITDA Income Taxes C
Slide 15: Effects of IFRS 16 on our 3Q19 results
EFFECTS OF IFRS 16 ON OUR 3Q19 RESULTS Pro forma Reported IFRS 16 3Q19 IFRS 3Q19 New accounting standard R$ Million Δ% YoY Δ% YoY w/o IFRS16 Adjustments w/ IFRS16 in force since January 2019, under which lessees are required to Net Operating Revenue 11,047 2.6% 0 11,047 2.6% account for leases in th
Slide 16: Investor Relations
For further information: Investor Relations +55 11 3430.3687 ir.br@telefonica.com | www.telefonica.com.br/ir